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PURA Hearing Probes Whether Legal Fees Should Count Toward Rate Base in Connecticut Water-Shaker Heights Deal
Summary
At a late-filed exhibit hearing in docket 260126, commissioners pressed Connecticut Water Company witnesses on whether the $43,013 in legal and transaction costs tied to a $50,000 purchase should be recognized in rate base; the company argued the costs produced customer benefit, while some commissioners voiced skepticism. No decision was reached; a ruling is tentatively set for Oct. 7.
Commissioner Jan Beecher convened a late-filed exhibit hearing in docket 260126 on the joint application by Connecticut Water Company to acquire Shaker Heights Water Company, during which commissioners examined whether transaction and legal costs should be folded into the acquisition’s recognized purchase price and rate base.
The company told the Public Utilities Regulatory Authority that the purchase price for the Shaker Heights system was $50,000 and that associated legal costs totaled $43,013, making a combined transaction amount of $93,013. In response to questioning from PURA staff, company witness Paul Dixon confirmed the amounts and explained the company’s rationale for seeking recovery treatment for the legal fees.
Chairman Veil voiced reservations about recognizing legal transaction costs in rate base. “I’m not particularly comfortable with the notion of PURA incorporating legal transaction costs into the book purchase price that’s recognized in rate base,” he said, characterizing such treatment as something that should be exceptional and carefully justified.
Dixon acknowledged the concern but urged a case‑by‑case approach, saying the legal work enabled a lower purchase price and translated into benefit for ratepayers. “I think that’s a fair assessment … there is value associated with the legal fees that does translate into customer benefit,” he said, adding that the company had calculated historical plant value near $200,000 while paying $50,000 for the asset.
Commissioner Beecher and others framed the issue as regulatory discretion: whether the expense should be treated as a recoverable acquisition adjustment (which would affect future rates) versus nonrecoverable goodwill. Dixon said recovery would be sought under acquisition-adjustment accounting, not as goodwill, because it would be recorded and audited as part of the company’s ratebase treatment.
No formal vote or decision was made at the hearing. PURA announced a tentative decision date of Oct. 7 for the docket. The authority emphasized that any allowance of legal fees would be considered on the facts of this case and would not automatically set broad precedent for other acquisitions.
Next steps: PURA will issue its decision in the docket on or about Oct. 7, and parties will await the written order for the authority’s final determination on whether, and to what extent, legal/transaction costs are recoverable.
